Wednesday, January 28, 2009

I had written earlier about the phenomenon of private labels in India, Link. But it was some time back and after that I have done some work in that area so thought will share it my readers.

Currently the way many of the organized retailers are conceptualising their private label strategy is very different from the way it is seen in countries where organized retail is very strong. If one sees the plans of Future Group, which owns Pantaloons and Big Bazaar retail stores, they are planning to an investment of Rs 200 crore into the private label business and target reaching a turnover of Rs 10,000 crore by 2012.

Among the organized retailer's the Future's group is the one which seems of a well thought out strategy, with the presence of private labels in most categories, with tasty treat and Fresh 'n' Pure in the groceries, Care Mate for home care, and Kroyo and Sensei in Consumer Durables.

The growth which Futures is planning would be achieved not only through the sales through its own retail stores but also by selling it to retailers outside its own network. which in essence goes against the traditional definition of private labels. One of the possible reasons why they are looking at this idea is that they know that getting economies of scale only through their selling in their own retailers stores might not be easy and the reality that mom-n-pop stores are going to be part of the retail reality of Indian market for a long time to come.

But one thing which I felt has been left out in the overall scheme of ideas is trying to understand the psyche of the Indian consumer and his response towards private labels. How is he perceiving them? why does he buy them and what are his expectations from a private label, because ultimate success of the private labels would depend on how willing are they to try and use these brands. One recent new paper article highlighted the fact that consumers were going back to mom-n-pop stores because they are not happy with offers or deals on private labels, and they are able to get similar offers on the manufacturer's brands from their regular corner grocery store, this is a worrying trend which should be watched out for. For more of the consumer response to organized retail check out the article link.

In my next posting I will share a few of my own observations on private labels at two of the prominent retailers in the country.